Exercise 7-21A (Algo) Current liabilities LO 7-1, 7-2, 7-4, 7-10

The following transactions apply to Ozark Sales for Year 1:

1. The business was started when the company received $49,500 from the issue of common stock.
2. Purchased equipment inventory of $176,000 on account.
3. Sold equipment for $198,000 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $123,000.
4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 4 percent of sales.
5. Paid the sales tax to the state agency on $148,000 of the sales.
6. On September 1, Year 1, borrowed $20,000 from the local bank. The note had a 5 percent interest rate and matured on March 1, Year 2.
7. Paid $5,600 for warranty repairs during the year.
8. Paid operating expenses of $54,000 for the year.
9. Paid $125,600 of accounts payable.
10. Recorded accrued interest on the note issued in transaction no. 6.

Required

1. Record the given transactions in a horizontal statements model.
2. Prepare the income statement, balance sheet, and statement of cash flows for Year 1.
3. What is the total amount of current liabilities at December 31, Year 1?

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OZARK SALES

Horizontal Statements Model

Event No.

Balance Sheet

Income Statement

Statement of Cash Flows

Assets

=

Liabilities

+

Stockholders Equity

Revenue

Expense

=

Net Income

Cash

+

Merchandise Inventory

=

Accounts Payable

+

Sales Tax Payable

+

Warranty Payable

+

Interest Payable

+

Notes Payable

+

Common Stock

+

Retained Earnings